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Investors in precious metals mine Polymetal International [LSE:POLY] may have been a little disappointed when its shares slid off the recent peak of £17.37. But this week they have been staging a turnaround, climbing from £14.15 to £15.22 at time of writing.

As a precious metals play, Polymetal International did well from late March ownwards, ascending from a low of just over a tenner, although this was still higher than its 52 week low of 87p. The company’s stock looks to still have some potential upside but much will depend on precious metals prices over the summer.

Polymetal International is ranked as one of the top gold and silver producers in Russia and Kazakhstan. It is the second biggest Russian gold miner and has nine gold and silver mines in operation. In 2019 it was responsible for gold equivalent production of 1,614 Koz of gold equivalent production.

RBC Capital Markets issued an outperform rating on the company on 29 May, but cut its price target from £19.25 to £18.

Polymetal International has an established growth trend

We think this company has got some ground to make up over the summer months and it can achieve this as global supply chains are gradually re-established, although regional chains in Russia are currently intermittment. On the upside the mining industry in Russia has been allowed to operate largely unmolested by government restrictions.

Apart from being recognised as a miner that actually takes its ESG commitments seriously, it has also been a company noted in the sector for its operational excellence, growing production 130% in 10 years from 681,000 oz of gold equivalent to 1.61m oz in 2019.

Polymetal has reported no interruptions in its operations in either production or with its supply chain in either Russia or Kazakhstan. Due to bans on international travel, its ability to move vital employees over the border between Russia and Kazakhstan has been pronounced at risk. Its operation at Dukat has been considered the most exposed but it has been filling vital operational gaps with temporary hires.

In order to further mitigate risks, Polymetal has proactively secured medium term notes of between six to nine months to establish a cash cushion for any potential liquidity gaps thatt could emerge during the crisis. As of 31 March, it had $565 million in cash on its balance sheet. It continues to maintain over $600 million in available credit lines for any additional requirements.

Polymetal maintains dividend

One of the good things about gold miners is that many of them look set to maintain their dividend regimes during the crisis. Polymetal has said it does not anticipate any impact from Covid-19 on liquidity and operations. A final dividend of $0.42 per share was approved by its AGM on 27 April and was paid on 29 May.

Polymetal International is not resting on its laurels, with a number of growth projects on the go around Russia and Kazakhstan. Adjusted EBITDA has been trending up since 2017 along with free cash flow.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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